June 20, 2018 / 12:09 AM / 10 months ago

UPDATE 2-Vitol launches Viva Energy float, Australia's biggest in 4 years

* Viva market capitalisation tipped at A$5 bln on listing

* Commitments already secured for half the IPO - source

* Offer to be priced between A$2.50 and A$2.60 a share

* Pricing based on 13.1-13.9 times forecast 2019 profit (Recasts, adds Viva Energy CEO, source, fund manager comments)

By Sonali Paul

MELBOURNE, June 20 (Reuters) - Global energy trader Vitol kicked off the planned A$5 billion ($3.7 billion) float of its Australian refinery and fuel supply network Viva Energy on Wednesday, in what would be the country's biggest initial public offering in four years.

The sale of the unit, which supplies about a quarter of Australia's fuel, is Vitol's second IPO this year after the London listing of an African fuel business and is expected to raise up to A$3 billion for the energy trader and its partners, who will retain a 40 to 50 percent stake.

It comes amid a shake-up of Australia's petrol retailing, with BP looking to take over top grocer Woolworths' petrol stations and Caltex Australia ditching its franchise model to run its own operations.

Vitol SA is looking to cash in on the $2.6 billion purchase in 2014 of Royal Dutch Shell's refinery in Geelong near Melbourne and a network of around 1,165 petrol stations. It has since spent over A$1 billion improving the business, including buying Shell's jet fuel operations.

Viva Energy is expected to list on the Australian Stock Exchange on July 13 with an indicative market capitalisation of around A$5 billion, according to the IPO documents.

Institutional investors have already committed to buy about A$1.2 billion worth of shares, which would be half the stock on offer at the bottom end of the offer price range, a person close to the process said.

The IPO pricing range looked reasonable for a business likely to benefit from demand for premium quality fuels, said Nikko Asset Management portfolio manager Tim Johnston.

"The volume outlook for the industry is relatively muted but extremely stable, and it's also an industry that's proven to have a high degree of pricing power," he said.


Viva's earnings grew 19 percent between 2015 and 2017, Chairman Robert Hill said in the prospectus.

"We have plans for the continued expansion of our retail network and see opportunities to benefit from growth in key commercial sectors," Hill said.

Gasoline sales, which make up about 25 percent of the business, are expected to hold steady or grow only slightly, with car fuel efficiency gains being offset by population growth and rising vehicle ownership, Viva Chief Executive Scott Wyatt told reporters on a conference call.

However the company sees good prospects in aviation fuel, with strong growth in air travel, especially with Chinese airlines coming into Australia and Viva Energy having pipelines into the country's two fastest growing airports -- Sydney and Melbourne.

The float is being priced at between A$2.50 and A$2.65 a share, or between 13.1 and 13.9 times forecast net profit for the year to June 2019.

Its closest listed rival, Caltex, is trading on a forward price-to-earnings multiple of 13.2, according to Thomson Reuters data.

Bank of America Merrill Lynch, Deutsche Bank and UBS are running the IPO.

The Viva sale follows Vitol's $2.6 billion London listing of its African business Vivo Energy in May, although an IPO of its European oil products venture was scrapped in April due to poor market conditions.

Vivo Energy's shares have dropped 16 percent from their offer price of 165 pence since listing on May 4, against a flat broader market. ($1 = 1.3534 Australian dollars) ($1 = 0.7596 pounds) (Reporting by Sonali Paul; editing by Richard Pullin)

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